India, smaller nations talk trade via Rupee accounts
India is in talks with about a dozen smaller countries as the government seeks to expand bilateral trades through bespoke rupee accounts and internationalise indigenous payment modes. The object is to bypass the dollar-denominated trades through baby steps and creating an alternative payment ecosystem other than the global SWIFT platform.
They include African countries such as Djibouti, Zimbabwe, Malawi, Ethiopia and Sudan, said people familiar with the matter.
Reserve Bank of India (RBI), Ministry of Finance and National Payment Corp. of India (NPCI) did not comment on the matter. The Indian Economic Trade Organization (IETO) and NPCI are primarily involved in such cross-border dialogue before it reaches the regulatory authorities. For example, the IETO organized a meeting of all ambassadors of the Common Market for Eastern and Southern Africa (Comesa) in Hyderabad last week. Senior Ministry of External Affairs and Telangana government officials were present. Madagascar also participated.
“We are dealing with a group of smaller countries who may be interested in doing bilateral trade through a dedicated rupee account,” said Asif Iqbal, president of IETO. “We are helping to initiate bilateral talks after which we will make a proposal for UPI payment system including NPCI. Such small steps will help the rupee gain international influence gradually through non-dollar bilateral trade.”
The Unified Payments Interface (UPI) developed by NPCI is the flagship payment system in the country and has gained worldwide recognition.
Cereals, sugar and plastic products are part of the country’s trade with Djibouti. Such transactions, if routed through any dedicated rupee account, may be settled in local currencies. The Djiboutian franc is equal to roughly half a rupee.
Similarly, trade with Ethiopia, Namibia, Cuba and Kenya can be directly settled in Indian rupees for birr, Namibian dollars, pesos and shillings.
Once the strategic partnerships between the countries are agreed, the RBI and the NPCI will be involved in addressing the technical aspects of the exchange rate and payments. Certainly, current trade volumes with these smaller countries are insignificant compared to giants like the US, UK or even Russia. But it would mark a start and grow to become potentially significant as more countries are added.
Sudan, which imports pharmaceuticals and confectionery among other things, could settle payments directly in rupees for its pound.
(www. economictimes.indiatimes.com)